Why Upwork Stock Is Plummeting Today
Key Points
Upwork beat sales expectations in Q2, but it posted an earnings miss.
The company's active client count continued to decline in the quarter.
Upwork issued significant downward revisions for its forward guidance.
Upwork (NASDAQ: UPWK) stock is losing ground on Tuesday following the release of the company's second-quarter results. The company's share price was down 12.2% as of 12:30 p.m. ET. At the same point in the daily session, the S&P 500 and the Nasdaq Composite had fallen 0.2% and 0.4%, respectively.
After the market closed yesterday, Upwork published its Q2 numbers. Results in the period were mixed, with earnings coming in below expectations despite a sales beat. Making matters worse, the gig-economy marketplace company lowered its full-year guidance.
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Upwork's mixed Q2 results weren't enough to excite investors
Upwork reported sales of roughly $191.7 million in the second quarter, beating the average analyst estimate by roughly $1.7 million. On the other hand, earnings per share of $0.20 in the period missed the average Wall Street target by $0.01. Sales were still down 1.7% year over year in the quarter, and active clients on the company's platform declined roughly 4% year over year to 763,000. A 5% increase in gross service volume (GSV) per customer to $5,230 helped offset the client decline, but the business is facing persistent headwinds.
What's next for Upwork?
With its Q2 report, Upwork lowered its full-year sales guidance to between $730 million and $750 million -- down from previous guidance for sales between $760 million and $790 million. Management also now expects non-GAAP (adjusted) earnings per share to be between $1.38 and $1.43 -- down from its previous target for earnings per share between $1.50 and $1.55.
Upwork CEO Hayden Brown called out automation driven by artificial intelligence technologies as a key reason for the downward revisions and also cited the lack of improvements in the labor market. The company's Q2 report delivered no indication that AI-related pressures are easing, and the trend could continue to depress the stock.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Upwork. The Motley Fool has a disclosure policy.